Superannuation funds wishing to stem the self-managed super fund tide should be offering product look-alikes or partnering with financial institutions providing SMSF services, says Russell Mason, Deloitte partner in superannuation.
With close to 1 million Australians directing their money to SMSFs, Mason says projections based on today’s activity sees up to three-quarters of the post-retirement-market monies going to SMSFs by 2030.
“What funds have to think [about] and look at, and what I’m doing with funds, is working out how we can integrate better what they offer with what an SMSF offers.”
Mason says SMSF users may wish to return to the safety of an APRA-regulated fund post-retirement, so funds should consider options that allow partial investment in a super fund while running an SMSF. He says cutting ties will be a permanent loss of money.
“You need to offer an SMSF look-alike or partner with an SMSF provider, so that your members can move part of their money – not all of their money – to an SMSF.”
In or out
Mason thinks funds need to reassess the pervasive attitude that members are either all in an industry fund or all in an SMSF.
“My view is, [the client] should sit back and say, okay, for Australian and international equities, my industry fund or retail fund offers me a relatively low-cost access to those products. I don’t pay much for active (or passive) management… Fixed interest? I get that cheaper. And certain asset classes like infrastructure, I can’t access myself, I need to do it through a wholesale vehicle.”
Rather than having a member transfer their $1-million balance to an SMSF, Mason says there should be the option of portioning funds. For example, leaving $600,000 with the industry fund and maintaining death and disability insurance, while the residual $400,000 goes into an SMSF and is used for small-cap shares, geared property and collectibles.
Mason says mid-tier to large super funds are showing interest in partnering with a financial institution, but none have signed on just yet.
“Some funds are decidedly nervous about that because these institutions have traditionally been their biggest competitors. But it’s commercial reality. In the real world, competitors are sometimes partners [that] can work together.”
Mason says as time goes on, the more successful industry funds will increasingly have the attributes of retail players. “And they will learn a lot from those retail players.”
Critical of the attitude that SMSFs are “bad”, Mason believes that they are a good option for some.
“They are leaving, and they don’t need to. There are ways around it,” he says. “I think what is bad and wrong is when people are sold the wrong product. So I’ve seen over time, and hopefully it doesn’t happen as much now, people with very small balances and no capacity to significantly grow those balances, being sold an SMSF.”